Inflation and counter-inflationary policy measures: The case of Poland

This report investigates recent inflationary developments in Poland, on the background of tendencies present in the EMU economies. It investigates structural aspects of infla-tion in Poland, and outcomes for growth and distribution. Tendencies in nominal wages and corporate mark-ups, and current strategies of the government and trade unions are analyzed. First, we demonstrate that inflationary dynamics in Poland is similar to the CEE average, yet much higher than in the EMU. This due to a relatively high share of energy, food and transport expenses in consumption. There are also inflationary pressures from a strong expansion as reflected in low unemployment, full capacity utilization and exchange rate depreciation. Second, we identified strong redistributive effects of inflation in Poland, reflected in declining real wages and labour share in na-tional income. We see extraordinarily high mark-ups and profits in the business sector, in particular in 2021. Finally, we identify the social dialogue in Poland as conflictual, with virtually no coordinated efforts to limit the rate of inflation. Under such conditions, government policies are of even higher importance. These focused primarily on miti-gating the social costs of inflation for households, and mostly took form of economy-wide tax cuts and transfers.